Friday, May 30, 2014

Before going to jail, lobbyist Jack Abramoff said of Thad Cochran's longtime assistant, "She gets everything she wants." Cochran's assistant who pled guilty before a judge delivered the Senator's support via taxpayer dollars to Abramoff clients. Why hasn't Cochran resigned in disgrace for his part in making the country's voters think even hard core leftists should be in charge of the US before Republicans?

The chief question is this one: how does an Executive Assistant making approximately $72,000.00 a yearafford a house worth $1,000,000.00 at the time of purchase and now worth more than a million dollars?

According to individuals who have reviewed the transaction, when
Webber purchased the house, she had a co-signor on the homewho was a
donor to Cochranand who listed her own occupation as homemaker. So a
congressional staffer making $72,000.00 and a homemaker who donated to
Cochran went in together and bought a million dollar home.

Now, here’s the real kicker. Ms. Webber and Mrs. Shows bought the
house for $1 million with, it appears, $200,000.00 down and an
$800,000.00 mortgage in 2001. At the time Ms. Webber’s congressional
salary was less than $100,000.00 a year and Mrs. Shows, who only had a
1% interest in the home according to individuals who have seen the
paperwork, listed her occupation as a homemaker. A year after the
purchase, Mrs. Shows gave Ms. Webber her interest in the home making Ms.
Webber the sole owner.

Ann
Copland wiped tears from her eyes as she admitted to U.S. District Judge
Richard Roberts that she took the gifts in exchange for helping one of
Abramoff's top clients, the Mississippi Band of Choctaw Indians.
Copland
is the latest among more than a dozen congressional aides, lobbyists,
lawmakersand Bush administration officials convicted as part of a
lobbying scandal spawned by Abramoff, a former high-flying influence
peddler now serving a four-year prison term. E-mails disclosed
in court documents that Copland sent to Abramoff's firm show she was
particularly demanding in what she wanted from the lobbyist. At one
point she sent a long list of ticket requests that included several
concerts, hockey, ice skating and the circus. At other times she sent
e-mails from inside the firm's luxury box seats complaining about the
food and drinks.

Among the e-mails filed in court was one from
lobbyist Todd Boulanger to his boss saying they should go out of their
way to keep Copland happy because "she's more valuable to us than a
rank-and-file House member."

Another e-mail from Kevin Ring, an
Abramoff associate, included a list of events Copland wanted to attend
and how many tickets she wanted for each event. She asked to see singer
Paul McCartney, an ice skating event, musical acts 'NSync and Green Day
and a hockey game. She also asked for two to six tickets to see the
circus, but only if they were floor seats.Abramoff responded: "She'll
get everything she wants."

A few worried that Wall Street would set out to exploit this young
market, fears the government dismissed. But many people believe that is
what happened this year when the price of the ethanol credits
skyrocketed 20-fold in just six months, according to an analysis of
regulatory documents and interviews with more than 40 people involved in
the market, including industry executives, brokers, traders and
analysts.

Traders for big banks and other financial institutions, these people
say, amassed millions of the credits just as refiners were looking to
buy more of them to meet an expanding federal requirement. Industry
executives familiar withJPMorgan Chase’s activities, for example, told
The Times that the bank offered to sell them hundreds of millions of the
credits earlier this summer. When asked how the bank had amassed such a
stake, the executives said they were told by the bank that it had
stockpiled the credits. .

A spokesman for JPMorgan, when asked about the exchange with the
executives, disputed the account, saying the bank does not trade ethanol
credits for a profit in the way it trades other securities, but is
registered to deal in credits through its energy business. From time to
time, the spokesman, Brian J. Marchiony, said in a statement that the
bank also purchased credits “on behalf of clients who need to fulfill
their E.P.A.-mandated obligations,” though it had not done so in the
past year.
.

He saidthe institutions had helped transform an environmental program
into a profit machine, contributing to the market frenzy this year.“These things were designed to monitor the inclusion of ethanol in the gasoline
pool,” Mr. O’Malley said. “They weren’t designed to become a
speculative item. For the life of me I can’t see the justification for
it.”
.

While banks are by no means the largest player in ethanol credits, Wall
Street’s activity in this market reflects a largereffort by financial
institutions to exert their influence overloosely regulated marketsfor
basic commodities, from aluminum to oil. The opacity of the ethanol
credit market makes it difficult to determine the extent to which large
financial actors have profited..

The banks say they have far less influence in the market than others are
suggesting, and are doing nothing wrong. But the activities, while
legal, could have consequences for consumers. In the end, energy
analysts say, the outcome will be felt at the gas pump — as the higher
cost of the ethanol credits gets tacked onto the price of a gallon of
gasoline. (The credits, which cost 7 cents each in January, peaked at
$1.43 in July, and now are trading for 60 cents.)
.

The Valero Energy Corporation, a refiner that owns thousands of gas
stations, says the squeeze in ethanol credits might cost it $800
million. PBF Energy, also a refiner, puts its bill at about $200
million. A review by The Times of a federal registry of nearly 1,500
businesses and individuals in the renewable fuel market found big Wall
Street banks as well as a handful of people with troubled legal
histories among the participants. Several high-profile cases of fraud
have emerged.
.

Scott Mixon, the acting chief economist of the Commodity Futures Trading Commission,
said in an interview Friday that the issue of banks’ involvement in
this market was something the agency was tracking and might look into
more deeply because of the ethanol component. The commission regulates
the commodities futures market, including trading in ethanol and
gasoline.
.

Every time they mix ethanol into gas, or import fuel already blended
with ethanol, energy companies get a credit from the government, and
that credit can be sold to other companies that don’t blend ethanol to
help them meet federal requirements. If refiners fall short of their
obligation, they can face fines of $32,500 a day. To monitor compliance,
each gallon of ethanol is assigned a 38-digit Renewable Identification
Number, or RIN. Six billion of them were generated in the first six
months of this year.
.

The E.P.A. makes sure participants comply with the fuel standard. But
rules that apply to almost every other market — on transparency,
disclosure and position limits, for example — are not imposed on the
trade of RINs, making Wall Street’s role harder to gauge.
.

If Wall Street traders take a 5 percent stake in a public company’s
stock, for instance, they are required by law to flag that they have
acquired a sizable stake in a filing with the Securities and Exchange Commission. There is no such obligation for traders buying RINs..

Like JPMorgan, other big banks downplay their involvement, contending
that they are in the market primarily because their firms, through
subsidiaries and other arrangements, have ownership interests in
gasoline and other energy production and therefore are required to
participate in the federal renewable fuels program. .

Until 1999, regulations barred banks from owning nonfinancial companies
like commodities operations. This was meant to keep banks from
self-dealing or pursuing monopolistic practices in their financial
operations that could benefit their nonfinancial affiliates. Separating
these operations, regulators believed, would also protect a bank’s core
lending and deposit-taking businesses from risky trading by nonfinancial
units. Those restrictions fell by the wayside with the passage of the
Gramm-Leach-Bliley Act, which struck down Depression-era banking laws.
Now, however, the Federal Reserve is reviewing commodities ownership by
banks. .

In the case of JPMorgan, the industry executives familiar with its
activities in the RINs market said they were told by a top banker in its
commodities operation about the stockpiling. The executives said the
banker maintained that one of JPMorgan’s traders had urged the bank to
buy up every available credit.The executives spoke on the condition of
anonymity for fear of harming business relationships.
.

Through a spokesman, the banker denied that the conversation took place. Mr. Marchiony, the JPMorgan
spokesman, characterized the report as a misunderstanding. He denied
the bank had stockpiled the credits. He added that the bank mainly dealt
in RINs as a byproduct of its joint venture with a refiner in
Philadelphia. “The fact of the matter is, we simply don’t trade RINs,
nor do we carry an inventory other than a marginal amount for compliance
purposes,” the statement said.
.

Mark Lake, a spokesman for Morgan Stanley, said that the firm had not
benefited from the increase in RIN prices in 2013. “The firm’s
obligation to purchase RINs as part of our importing and blending of
gasoline exceeded the RINs we have received from our wholesale
business,” he said.

Mr. Lake declined to discuss Morgan Stanley’s holdings of RINs or to say
whether the bank’s traders used market information received from
TransMontaigne.
.

Trading on information gleaned from a subsidiary like TransMontaigne
would be illegal in the stock market, but there are no rules against it
in commodities. (Morgan Stanley also holds a stake Heidmar Holdings, of Norwalk, Conn., which owns a fleet of oil tankers.) .

Saule T. Omarova, an associate professor of law at the University of
North Carolina at Chapel Hill, said Morgan Stanley’s overlapping
activities illustrate how large financial institutions have become
deeply entwined in every aspect of the commodities markets. .

“In the trading chain between the oil well and the gas station,” Ms.
Omarova said, “Morgan Stanley is clearly accumulating as many stakes
along the way as possiblebecause that is what gives them the most
flexibility of control.”.

Officials at the E.P.A., which oversees the market, say they have seen
no evidence of improper trading, like hoarding, in the market. But they
do not police the RIN market as a financial regulator would. .

“If there were any evidence now or in the future that that was
happening, we have the ability to amend the regulation to constrain
that,” said Christopher Grundler, director of E.P.A.’s office of
transportation and air quality, which oversees the renewable fuels
program.
.

Trading is a private affair, usually conducted by phone, and just about
anyone can participate. In creating the market, the E.P.A. says it did
not limit the market for RINs to refiners and other energy companies
because it wanted to encourage a free market.

Price movements on other commodities futures are limited by the
exchanges on which they trade as a check on speculation. But the biofuel
credits are not traded on an exchange: their prices are unbridled. And,
unlike in the broader financial industry, no formal qualification or
license is required before a broker can start trading. .

“There is a RINs trading desk at any major brokerage now,” said Paul
Niznik, bio-fuels manager for Hart Energy, based in Houston. “There are
people who are not refiners that are buying and selling RINs like a
commodity.They treat it like something to be traded, to be day-traded.” .

But the estimates Congress used about how much gas Americans would keep
buying were wrong. When the biofuel credits were created, gasoline
consumption was projected to grow 6 percent by 2013. But thanks in large
part to the recession and more fuel-efficient cars, consumption has
actually fallen. .

As a result, refiners this year began hitting what is known as “the
blend wall,” meaning that the amount of ethanol the government is
requiring them to use is close to the maximum amount that can be blended
into gasoline without creating problems for gas stations and motorists.
.

Distributing gasoline with greater levels of ethanol is more costly and
corrodes gas station pumps and tanks. Raising the ethanol level in
gasoline, therefore, would require gas stations across America to
install new systems. Therefore, refiners have turned to RINs to meet
their government obligations rather than blend more ethanol into
gasoline.
.

Some say financial players saw it coming, and jumped into the market. .

“When you see something change as rapidly as this, somebody’s hoarding
them, somebody’s buying them, somebody’s making big bucks,” said Senator
Thomas A. Coburn, Republican of Oklahoma, a big oil state. After his
staff examined the run-up in prices this summer, he said he was
concerned that “big moneyed interests” were gaming the credits. .

For now, companies like Valero say that they are eating the cost of high
RIN prices, which are still eight times more expensive than they were
in January.But industry analysts, executives and even researchers at
the investment banks predict the cost of the RINs’ surge will be passed
along to consumers by increasing the price of gasoline, if not later
this year then next year.

Mr. O’Malley, the chairman of PBF Energy, likens the outcome to a hidden
tax on the public. Unlike other taxes, which go to the government, this
one goes to the speculators.

Double-Dipping on Credits

Every day, RINs are born in places like Fort Lauderdale, Fla.,
Chesapeake, Va., and Bainbridge, Ga. Across a network of 45 fuel
terminals in the Southeast, and along the Mississippi and Ohio rivers,
Morgan Stanley’s TransMontaigne stores, blends and distributes gasoline
and other fuels. .

Even though it is based in Denver, TransMontaigne sits at the center of a
powerful Wall Street energy operation. It delivers 200,000 barrels of
refined petroleum products each day, just under 2.5 percent of the total
market, and plays a role in the RINs market in addition to any trading
its parent, Morgan Stanley, might do. Morgan Stanley bought
TransMontaigne in 2006. .

For banks, trading RINs for clients can be lucrative. A big reason is
that the credits are far more difficult to buy and sell because they are
not traded on exchanges like stocks. As a result, the difference
between the price at which one party is willing to sell and another is
willing to buy is unusually wide. Those fat spreads mean big money for
anyone serving as a middleman..

At a hearing in late July at the Commodity Futures Trading Commission,
Mr. Mixon, the commission’s acting chief economist, estimated that RIN
spreads were 4 percent of a transaction’s value. That is far more than
the average stock commission.

In addition to Morgan Stanley and JPMorgan Chase, other big banks, like
Citigroup and Barclays, are also registered with the E.P.A. to trade the
credits.

Edward Westlake, an analyst at Credit Suisse, said many big financial
firms have gone beyond RINs trading and pushed into blending fuel to
create them as well. “Building a tank and blending doesn’t cost a lot of
money,” Mr. Westlake said, “and there are folks on Wall Street who own
tanks who are benefiting from the RINs.” .

Bank research departments are also trying to pique investor interest in
this market. Goldman Sachs and Bank of America Merrill Lynch recently
published bullish reports on the market. In July, Morgan Stanley
published a report predicting that RIN prices would keep rising —

Officials at the E.P.A. do not see excessive influence by financial
speculators. They suggest the price spikes in RINs this year reflect the
expectation of a shortage of the credits because rising renewable fuel
mandates are occurring as consumer demand for gasoline is falling. “The
market is expecting this future scarcity as the statutory mandates
continue to increase,” Mr. Grundler said.

Others say that prices are up mostly because the oil industry has
refused to invest in renewable energy. For example, Jeremy Martin, a
clean energy expert for theUnion of Concerned Scientists, said many of
the complaints about the credits come from industry players who want to
see the renewable fuels program killed.
.

“It was meant to change behavior, and it was understood that if it was
to be binding, RIN prices would not be close to zero,” Mr. Martin said.
.

In fact even before RINs took off, they had become a contentious issue
within the energy industry. Ethanol producers like the renewable fuel
standards because they essentially guarantee a market for their product.
But refiners — particularly those without operations to blend the fuel —
regard the standards as an onerous and unnecessary business cost.

As the credits get more expensive, she says, oil and gas companies have a
financial incentive to add more ethanol to fuel rather than buy
credits. That, in turn, reduces oil imports and emissions — which was
the point of creating the system in the first place.
.

Ms. Oge, who retired from the E.P.A. last year and is now a visiting
scholar at the International Council on Clean Transportation, a research
group in Washington, said RINs were never supposed to affect the price
of gasoline at the pump. If that is the result of the price run-up this
year, as many energy analysts predict, it would be an unwelcome outcome,
she said. “The last thing we wanted in implementing this program is to get price increases for the consumer,” she said.
.

Even beyond the likely rise in gasoline prices,critics of the RINs
market say it is deeply flawed,and they do not share Ms. Oge’s
optimistic takeaway of this year’s market frenzy.
.

First, by allowing anyone to trade, including those with no real
interest in energy, the E.P.A. encouraged speculation, the critics say.
Second, the market operates largely in the dark, leaving it vulnerable
to manipulation. Third, and perhaps most significant, the federal
requirement for ethanol in gasoline means oil companies are captive
buyers— meaning they are required to buy the credits when they do not
or cannot blend their own fuel — a fact that savvy traders use to their
advantage. .

“The problem the E.P.A. had is they opened up the market on the trading
side, but restricted it on the obligated side to refiners and
importers,” said Lawrence J. Goldstein, the former president of the
Petroleum Industry Research Foundation, a nonprofit bipartisan group.

Analysts and others say the market is vulnerable to questionable
practices like short squeezes, where prices are pushed up by holders of
the credits to benefit their positions.

“Anybody who’s participating in these markets has the opportunity to
throw their weight around,” said David J. Hackett, president of
Stillwater Associates, a transportation energy consulting firm.

“Whether
it’s a hedge fund or a refiner or ethanol producer, they would tend to
drive the market in directions that are beneficial for whatever their
goals.” .

An examination by The Times of participants registered with the E.P.A.
found several people with troubled pasts,including one who was accused
of helping run a Ponzi scheme, and another who pleaded guilty to illegal storage of hazardous waste. .

The RINs market has come off the boil recently, but at 60 cents apiece
the credits still cost far more than they did at the beginning of the
year.While the E.P.A. says the market is sound, W. David Montgomery, an
economist at Nera Economic Consulting, a unit of Marsh & McLennan,said the agency should install an overseer. .

The E.P.A. disagrees,but said it was considering providing more data on
who trades and holds RINs and had instituted a voluntary certification
system for participants.
.

“We are exploring things like increasing the regularity of updating the
transactional data system and providing more information about
production volumes,” Mr. Grundler, the E.P.A. official, said. “All are
aimed at increasing confidence in this market and increasing compliance,
which is our major concern.”
.

But Tom Kloza, an analyst at the Oil Price Information Service, a
leading source of petroleum pricing, saidthe potential for abuse will
not disappear on its own. .

“You could conceivably have a company in the middle holding millions of
RINs,” Mr. Kloza said.
.

“Any entity could have a 1, 2 or 5 percent market
share in RINs and is waiting to sell them at some explosive gain. I
wonder, who’s got the score card?”"

"The Environmental Protection Agency last week sent out 24 notices of
violations to companies linked to the purchase and use of what turned
out to be fake “renewable identification numbers” sold by Clean Green
Fuel. A RIN is a 38-digit number required by the EPA to document the
production of a certain amount of renewable-blended fuel."....

But the ethanol era has proven far more damaging to the environment than politicians promised and much worse than the government admits today.
As farmers rushed to find new places to plant corn, they wiped out millions of acres of conservation land, destroyed habitat and polluted water supplies, an Associated Press investigation found.

Five million acres of land set aside for conservation — more than Yellowstone, Everglades and Yosemite National Parks combined —

have vanished on Obama’s watch.

Landowners filled in wetlands. They plowed into pristine prairies,

releasing carbon dioxide that had been locked in the soil.

Sprayers pumped out billions of pounds of fertilizer, some of which
seeped into drinking water, contaminated rivers and worsened the huge dead zone in the Gulf of Mexico where marine life can’t survive.

In Kansas, for instance, farmers planted 1.35 million more acres of corn last year than they did the year before the ethanol mandate was passed.

Farmers planted 15 million more acres of corn last year than before the ethanol boom, and the effects are visible in places like south central Iowa.

The hilly, once-grassy landscape is made up of fragile soil that,
unlike the earth in the rest of the state, is poorly suited for corn.
Nevertheless, it has yielded to America’s demand for it.

“They’re raping the land,” said Bill Alley, a member of the board of
supervisors in Wayne County, which now bears little resemblance to the
rolling cow pastures shown in postcards sold at a Corydon pharmacy.

All energy comes at a cost. The environmental consequences of
drilling for oil and natural gas are well documented and severe. But in
the president’s push to reduce greenhouse gases and curtail global
warming, his administration has allowed so-called green energy to do not-so-green things.

In some cases, such as its decision to allow wind farms to kill
eagles, the administration accepts environmental costs because they pale
in comparison to the havoc it believes global warming could ultimately
cause.

Ethanol is different.

The government’s predictions of the benefits have proven so inaccurate that independent scientists question whether itwill ever achieve its central environmental goal: reducing greenhouse gases. That makes the hidden costs even more significant.

“This is an ecological disaster,” said Craig Cox with the Environmental Working Group, a natural ally of the president that, like others, now finds itself at odds with the White House.

But it’s a cost the administration is willing to accept. It believes supporting corn ethanol is the best way to encourage the development of biofuels that will someday be cleaner and greener than today’s. Pulling the plug on corn ethanol, officials fear, might mean killing any hope of these next-generation fuels.

“That is what you give up if you don’t recognize that renewable fuels
have some place here,” EPA administrator Gina McCarthy said in a recent
interview with AP. “All renewable fuels are not corn ethanol.”

Still, corn supplies the overwhelming majority of ethanol in the United States, and the administration is loath to discuss the environmental consequences.

“It just caught us completely off guard,” said Doug Davenport, a Department of Agriculture official
who encourages southern Iowa farmers to use conservation practices on
their land. Despite those efforts, Davenport said he was surprised at
how much fragile, erodible land was turned into corn fields.

Shortly after Davenport spoke to The Associated Press, he got an email ordering him to stop talking. “We just want to have a consistent message on the topic,” an Agriculture Department spokesman in Iowa said.

That consistent message was laid out by Agriculture Secretary Tom Vilsack, who spoke to ethanol lobbyists on Capitol Hill recently and said ethanol was good for business.

“We are committed to this industry because we understand its benefits,” he said. “We understand it’s about farm income. It’s about stabilizing and maintaining farm income which is at record levels.”

The numbers behind the ethanol mandate have become so unworkablethat,
for the first time, the EPA is soon expected to reduce the amount of
ethanol required to be added to the gasoline supply. An unusual
coalition of big oil companies, environmental groups and food companies
is pushing the government to go even further and reconsider the entire
ethanol program.

The ethanol industry is fighting hard against that effort.
Industry spokesman Brooke Coleman dismissed this story as “propaganda
on a page.” An industry blog in Minnesota said the AP had succumbed “to
Big Oil’s deep pockets and powerful influence.”

To understand how America got to an environmental policy with such harmful environmental consequences, it’s helpful to start in a field in Iowa.

Leroy Perkins, a white-haired, 66-year-old farmer in denim overalls,
stands surrounded by waist-high grass and clover. He owns 91 acres like
this, all hilly and erodible, that he set aside for conservation years
ago.

Soon, he will have a decision to make: keep the land as it is or, like many of his neighbors, plow it down and plant corn or soybeans, the major sources of biofuel in the United States.
“I’d like to keep it in,” he said. “This is what southern Iowa’s for: raising grass.”

For Perkins and his farmer neighbors in Wayne County, keeping
farmland in conservation wasn’t just good stewardship. It made financial
sense.

A decade ago, Washington paid them about $70 an acre each year to
leave their farmland idle. With corn selling for about $2 per bushel (56
pounds) back then, farming the hilly, inferior soil was bad business.

Many opted into the conservation program. Others kept their grasslands for cow pastures.
Lately, though, the math has changed. “I’m coming to the point where financially, it’s not feasible,” Perkins said.

Oil prices were high. Oil imports were rising quickly. The legislation had the strong backing of the presidential candidate who was the junior senator from neighboring

Illinois, the nation’s second-largest corn producer.

“If we’re going to get serious about investing in our energy future,
we must give our family farmers and local ethanol producers a fair shot at success,” Obama said then.

The Democratic primary field was crowded, and if he didn’t win the Iowa caucuses the road to the nomination would be difficult.

His strong support for ethanol set him apart.

“Any time we could talk about support for ethanol, we did,” said
Mitch Stewart, the battleground states director for Obama’s 2008
campaign. “It’s how we would lead a lot of discussions.”

President Bush signed the bill that December. It would fall on the next president to figure out how to make it work.

President Obama’s team at the EPA was sour on the ethanol mandate from the start.As a way to reduce global warming, they knew corn ethanol was a dubious proposition.
Corn demands fertilizer, which is made using natural gas. What’s worse,
ethanol factories typically burn coal or gas, both of which release
carbon dioxide.

Then there was the land conversion, the most controversial and difficult-to-predict
outcome. Digging up grassland releases greenhouse gases, so
environmentalists are skeptical of any program that encourages planting
more corn.

“I don’t remember anybody having great passion for this,” said Bob
Sussman, who served on Obama’s transition team and recently retired as
EPA’s senior policy counsel. “I don’t have a lot of personal enthusiasm
for the program.”

At the White House and the Department of Agriculture, though, there was plenty of enthusiasm.One of Obama’s senior advisers, Pete Rouse, had worked on ethanol issues as chief of staff to Sen. Tom Daschle of South Dakota, a major ethanol booster and now chair of the DuPont Advisory Committee on Agriculture Innovation and Productivity.

Another adviser at the time, Heather Zichal, grew up in northeast Iowa
— as a child, she was crowned “sweet corn princess” — and was one of
the Obama campaign’s leading voices on ethanol in her home state.

The administration had no greater corn ethanol advocate than Vilsack,

the former Iowa governor.

“Tom understands that the solution to our energy crisis will be found
not in oil fields abroad but in our farm fields here at home,” Obama said in 2008. “That is the kind of leader I want in my Cabinet.”

Writing the regulations to implement the ethanol mandate was among
the administration’s first major environmental undertakings. Industry
and environmental groups watched closely.
The EPA’s experts determined that the mandate would increase demand
for corn and encourage farmers to plow more land. Considering those
factors, they said, corn ethanol was only slightly better than gasoline
when it came to carbon dioxide emissions. Sixteen percent better, to be
exact. And not in the short term. Only by 2022.
. By law, though, biofuels were supposed to be at least 20 percent greener than gasoline.
From a legal standpoint, the results didn’t matter. Congress exempted existing coal- and gas-burning ethanol plants from meeting this standard..
But as a policy and public relations issue, it was a real problem. The biofuel-friendly Obama administration was undermining the industry’s major selling point: that it was much greener than gasoline.
. So the ethanol industry was livid. Lobbyists flooded the EPA with criticism, challenging the government’s methods and conclusions.
.
The EPA’s conclusion was based on a model. Plug in some assumed
figures — the price of corn, the number of acres planted, how much corn
would grow per acre — and the model would spit out a number.
To get past 20 percent, the EPA needed to change its assumptions.
The most important of those assumptions was called the yield, a
measure of how much corn could be produced on an acre of land. The
higher the yield, the easier it would be for farmers to meet the growing
demand without plowing new farmland, which counted against ethanol in
the greenhouse gas equation.

Corn yields have inched steadily upward over the years as farms have
become more efficient. The government’s first ethanol model assumed that
trend would continue, rising from 150 bushels per acre to about 180 by
the year 2022.

Agriculture companies like Monsanto Co. and DuPont Pioneer, which stood to make millions off an ethanol boom,told the government those numbers were too low.

They predicted that genetically modified seeds — which they produce
— would send yields skyrocketing. With higher yields, farmers could
produce more corn on less land, reducing the environmental effects.

Documents show the White House budget office also suggested the EPA raise its yield assumptions.When the final rule came out, the EPA and Agriculture officials added a new “high yield case scenario” that

assumed 230 bushels per acre.

The flaw in those assumptions, independent scientists knew, was that a
big increase in corn prices would encourage people to farm in less
hospitable areas like Wayne County, which could never produce such large
yields.

But the EPA’s model assumed only a tiny increase in corn prices.
“You adjust a few numbers to get it where you want it, and then you
call it good,” said Adam Liska, assistant professor of biological
systems engineering at the University of Nebraska. He supports ethanol,
even with its environmental trade-offs.

When the Obama administration finalized its first major green-energy
policy, corn ethanol barely crossed the key threshold. The final score:
21 percent.

“If you corrected any of a number of things, it would be on the other
side of 20 percent,” said Richard Plevin of the Transportation
Sustainability Research Center at the University of California,
Berkeley. “Is it a coincidence this is what happened? It certainly makes
me wonder.”

It didn’t take long for reality to prove the Obama administration’s predictions wrong.

The regulations took effect in July 2010. The following month, corn prices already had surpassed the EPA’s long-term estimate of $3.22 a bushel. That September, corn passed $4,

on its way to about $7, where it has been most of this year.

Yields, meanwhile, have held fairly steady. But the ethanol boom was underway.

It’s impossible to precisely calculate how much ethanol is
responsible for the spike in corn prices and how much those prices led
to the land changes in the Midwest. Supporters of corn ethanol say
extreme weather — dry one year, very wet the next — hurt farmers and
raised prices.

But diminishing supply wasn’t the only factor. More corn than ever was being distilled into ethanol.

Historically, the overwhelming majority of corn in the United States has been turned into livestock feed. But in 2010, for the first time, fuel was the No. 1 use for corn in America. That was true in 2011 and 2012. Newly released Department of Agriculture data show that,

this year, 43 percent of corn went to fuel and 45 percent went to livestock feed.

Forty-four percent last year’s corn crop was used for fuel, about
twice the rate in 2006, according to the Department of Agriculture.

The more corn that goes to ethanol, the more that needs to be planted to meet other demands.Scientists predicted that a major ethanol push would raise prices and, in turn, encourage farmers like Leroy Perkins to plow into conservation land. But the government insisted otherwise.

In 2008, the journal Science published a study with a dire conclusion: Plowing over conservation land

releases so much greenhouse gas that

it takes 48 years before new plants can break even and start reducing carbon dioxide.

For an ethanol policy to work, the study said, farmers could not plow into conservation land.The EPA, in a report to Congress on the environmental effects of ethanol, said it was “uncertain” whether farmers would plant on farmland that had been set aside for conservation.

The Department of Energy was more certain. Most
conservation land, the government said in its response to the study, “is
unsuitable for use for annual row crop production.”

America could meet its ethanol demand without losing a single acre of conservation land, Energy officials said.

They would soon be proven wrong.

Before the government ethanol mandate, the Conservation Reserve
Program grew every year for nearly a decade. Almost overnight, farmers
began leaving the program, which simultaneously fell victim to budget
cuts that

reduced the amount of farmland that could be set aside for conservation.

In the first year after the ethanol mandate, more than 2 million acres disappeared.Since Obama took office, 5 million more acres have vanished.

Agriculture officials acknowledge that conservation land has been
lost, but they say the trend is reversing. When the 2013 data comes out,
they say it will show that as corn prices stabilized, farmers once
again began setting aside land for conservation.
Losing conservation land was bad. But something even worse was happening.
Farmers broke ground on virgin land, the untouched terrain that
represents, from an environmental standpoint, the country’s most
important asset.
The farm industry assured the government that wouldn’t happen. And it would have been an easy thing for Washington to check.
. But rather than insisting that farmers report
whenever they plow into virgin land, the government decided on a much
murkier oversight method: Washington instead monitors the total number
of acres of cropland nationwide. Local trends wash away when viewed at
such a distance.
.
“They could not have designed a better approach to not detect land conversion,” said Ben Larson, an agricultural expert for the National Wildlife Federation. Look
closely at the corn boom in the northern Great Plains, however, and
it’s clear. Farmers are converting untouched prairie into farmland.
. The Department of Agriculture began keeping figures on virgin land only in 2012 and determined that about 38,000 acres vanished that year.
. But using government satellite data — the best tool available — the AP identified a conservative estimate of 1.2 million acres of virgin land in Nebraska and the Dakotas alone that have been converted to fields of corn and soybeans since 2006, the last year before the ethanol mandate was passed.

“The last five years, we’ve become financially solvent,” said Robert Malsam, a farmer in Edmunds County, S.D., who like others in the central and eastern Dakotas has plowed into wild grassland to expand his corn crop.

The price of corn is reshaping the land across the Midwest. In Wayne County, Iowa, for example, only the dead can stop the corn.

A gravel road once cut through a grassy field leading to a hilltop
cemetery. But about two years ago, the landowners plowed over the road.
Now, visiting gravesites means walking a narrow path through the corn.
People have complained. It’s too narrow for a hearse, too rutted for a
wheelchair, too steep for the elderly. But it’s legal, said Bill Alley
from the board of supervisors.

“This is what the price of corn does,” he said. “This is what happens, right here.”

When Congress passed the ethanol mandate, it required the EPA to thoroughly study the effects on water and air pollution. In his recent speech to ethanol lobbyists,

Vilsack was unequivocal about those effects:

“There is no question air quality, water quality is benefiting from this industry,” he said.

In an interview with the AP after his speech, Vilsack said he didn’t
mean that ethanol production was good for the air and water. He simply
meant that gasoline mixed with ethanol is cleaner than gasoline alone.

In the Midwest, meanwhile, scientists and conservationists are sounding alarms.

Nitrogen fertilizer, when it seeps into the water, is toxic.Children are especially susceptible to nitrate poisoning, which causes “blue baby” syndrome and can be deadly.

Between 2005 and 2010, corn farmers increased their use of nitrogen fertilizer by more than one billion pounds.More recent data isn’t available from the Agriculture Department, but because of the huge increase in corn planting, even conservative projections by the AP

suggest another billion-pound fertilizer increase on corn farms since then.

Department of Agriculture officials note that the amount of
fertilizer used for all crops has remained steady for a decade,
suggesting the ethanol mandate hasn’t caused a fertilizer boom across
the board.
But in the Midwest, corn is the dominant crop, and officials say the
increase in fertilizer use — driven by the increase in corn planting —
is having an effect.

The Des Moines Water Works, for instance, has faced high nitrate
levels for many years in the Des Moines and Raccoon Rivers, which supply
drinking water to 500,000 people. Typically, when pollution is too high in one river, workers draw from the other.
“This year, unfortunately the nitrate levels in both rivers were so high that it created an impossibility for us,” said Bill Stowe, the water service’s general manager.
For three months this summer, workers kept huge machines running around the clock to clean the water. Officials asked customers to use less water so the utility had a chance to keep up.
Part of the problem was that last year’s dry weather meant fertilizer
sat atop the soil. This spring’s rains flushed that nitrogen into the
water along with the remnants of the fertilizer from the most recent
crop.

At the same time the ethanol mandate has encouraged farmers to plant more corn, Stowe said, the government hasn’t done enough to limit fertilizer use or regulate the industrial drainage systems that flush nitrates and water into rivers and streams.

With the Water Works on the brink of capacity, Stowe said he’s considering suing the government to demand a solution.

In neighboring Minnesota, a government report this year found that
significantly reducing the high levels of nitrates from the state’s
water would require huge changes in farming practices at a cost of roughly $1 billion a year.

“We’re doing more to address water quality, but we are being
overwhelmed by the increase in production pressure to plant more crops,”
said Steve Morse, executive director of the Minnesota Environmental
Partnership.

The nitrates travel down rivers and into the Gulf of Mexico, where they boost the growth of enormous algae fields. When the algae die, the decomposition consumes oxygen, leaving behind

“On the one hand, the government is mandating ethanol use,” he said, “and it is unfortunately coming at the expense of the Gulf of Mexico.”

The dead zone is one example among many of a peculiar ethanol side effect:

As one government program encourages farmers to plant more corn,

other programs pay millions to clean up the mess.

Obama administration officials know the ethanol mandate hasn’t lived up to its billing.The next-generation biofuels that were supposed to wean the country off corn haven’t yet materialized. Every year, the EPA predicts millions of gallons of clean fuel will be made from agricultural waste.

Every year, the government is wrong.

Every day without those cleaner-burning fuels, the ethanol industry stays reliant on corn and the environmental effects mount.

The EPA could revisit its model and see whether ethanol is actually as good for the environment as officials predicted.

But the agency says it doesn’t have the money or the manpower.

Even under the government’s optimistic projections, the ethanol
mandate wasn’t going to reduce greenhouse gas right away. And with the
model so far off from reality, independent scientists say it’s hard to
make an argument for ethanol as a global warming policy….

In June, when Obama gave a major policy speech on reducing greenhouse
gas, he didn’t mention ethanol. Biofuels in general received a brief,
passing reference.

What was once billed as an environmental boon has morphed into

a government program to help rural America survive.

“I don’t know whether I can make the environmental argument, or the
economic argument,” Vilsack said in an interview with the AP. “To me, it’s an opportunity argument.”

Bob Dinneen, president of the Renewable Fuels Association, the ethanol lobbying group, said there’s no reason to change
the standards. Ethanol still looks good compared to the oil industry,
which increasingly relies on environmentally risky tactics like
hydraulic fracturing or pulls from carbon-heavy tar sands.

Leroy Perkins, the farmer agonizing about what to do with his 91
acres, says he likes ethanol as a product and an industry. But he knows it fuels the corn prices that are transforming his county.